Using Analytics to Detect Possible Fraud
Tools and Techniques
Wiley Corporate F&A
1. Edition September 2013
368 Pages, Hardcover
Wiley & Sons Ltd
Detailed tools and techniques for developing efficiency and effectiveness in forensic accounting
Using Analytics to Detect Possible Fraud: Tools and Techniques is a practical overview of the first stage of forensic accounting, providing a common source of analytical techniques used for both efficiency and effectiveness in forensic accounting investigations. The book is written clearly so that those who do not have advanced mathematical skills will be able to understand the analytical tests and use the tests in a forensic accounting setting. It also includes case studies and visual techniques providing practical application of the analytical tests discussed.
* Shows how to develop both efficiency and effectiveness in forensic accounting
* Provides information in such a way that non-practitioners can easily understand
* Written in plain language: advanced mathematical skills are not required
* Features actual case studies using analytical tests
Essential reading for every investor who wants to prevent financial fraud, Using Analytics to Detect Possible Fraud allows practitioners to focus on areas that require further investigative techniques and to unearth deceptive financial reporting before it's too late.
Acknowledgments xv
Chapter 1: Overview of the Companies 1
The Four Companies 2
Company 1 2
Company 2 5
Company 3 8
Company 4 10
Summary 16
Chapter 2: The "Norm" and the "Forensic" Preliminary Analytics: Basics Everyone Should Know 19
Liquidity Ratios 20
Working Capital 21
Working Capital Index 21
Working Capital Turnover 22
Current Ratio 22
Case Studies: Liquidity Ratios 22
Profitability Ratios 25
Gross Profit 26
Gross Profit Margin 26
Stock Sales 26
Return on Equity 27
Case Studies: Profitability Ratios 27
Company 1 31
Horizontal Analysis 36
Company 1 36
Company 2 43
Company 3 50
Company 4 61
Vertical Analysis 66
Company 1 66
Company 2 70
Company 3 73
Company 4 79
Summary 79
Chapter 3: The Importance of Cash Flows and Cash Flow Statements 83
Cash Flows and Net Income 85
Company 1 87
Company 2 89
Company 3 92
Company 4 97
Other Cash Flow Techniques 100
Company 1 101
Company 2 104
Company 3 107
Company 4 114
Summary 117
Chapter 4: The Beneish M-Score Model 119
Company 1 124
Company 2 133
Company 3 143
Indices of the Primary Government 145
Indices of the Governmental Funds 151
Company 4 158
Summary 166
Notes 170
Chapter 5: The Accruals 171
Dechow-Dichev Accrual Quality 173
The Four Companies: Dechow-Dichev Model 175
Sloan's Accruals 184
The Four Companies: Sloan's Model 185
Jones Nondiscretionary Accruals 191
The Four Companies: Jones Model 192
Summary 196
Notes 198
Chapter 6: Analysis Techniques Using Historical Financial Statements and Other Company Information 199
The Piotroski F-Score Model 200
Company 1 203
Company 2 205
Company 3 207
Company 4 212
Lev-Thiagarajan's 12 Signals 215
Company 1 220
Company 2 222
Company 3 225
Company 4 230
Summary 233
Notes 235
Chapter 7: Benford's Law, and Yes--Even Statistics 237
Benford's Law 239
Company 1 243
Company 2 249
Company 3 255
Company 4 267
Simple Statistics 272
Company 1 277
Company 2 281
Company 3 284
Company 4 289
Summary 290
Note 292
Chapter 8: Grading the Four Companies 293
Company 1 294
Company 2 302
Company 3 310
Company 4 320
Summary 326
Bibliography 329
About the Author 331
Index 333
